The formula for the steady-state ratio of capital to labor (k*) with population growth at rate n but no technological change, where s is the saving rate, is s:

As per the formula for the steady-state ratio of capital to labor, s or the saving rate is 'multiplied by f(k*) i.e. the population growth rate and divided by the rate of depreciation.' This is calculated to ensure that the economy reaches optimal capital-labor ratio i.e. 'k' which will remain perpetually. Thus, option D is the correct answer.

andromache andromache · Answer 2 · 2021-11-18T12:45:48+01:00

It should be multiplied by f(k*) divided by the rate of depreciation.

The following information regarding the steady-state ratio is:

The formula of steady-state ratio of capital to labor or the rate of saving should be multiplied by f(k*). This denotes the growth rate of population and it should be divided by the depreciation rate.
It should be determined that the economy should reached to the capital labor ratio i.e. K.

Therefore we can conclude that It should be multiplied by f(k*) divided by the rate of depreciation.

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